Aviation finance—PDP financing: purchase agreements, finance facility and security
Produced in partnership with Norton Rose Fulbright
Aviation finance—PDP financing: purchase agreements, finance facility and security

The following Banking & Finance guidance note Produced in partnership with Norton Rose Fulbright provides comprehensive and up to date legal information covering:

  • Aviation finance—PDP financing: purchase agreements, finance facility and security
  • PDPs and purchase agreements
  • The PDP financing facility
  • Security

Pre-Delivery Payment financing (PDP financing) has developed into a commonly used financing tool for airlines and lessors. However, the increase in the number of PDP financings has led to close scrutiny by the aircraft manufacturers into the industrial and commercial issues which arise as a result of the involvement of a financier in aircraft purchase arrangements. In any PDP financing there may therefore be significant commercial issues to be negotiated, as well as sometimes complex legal issues, particularly in relation to security, to be considered.

PDPs and purchase agreements

What are Pre-Delivery Payments?

Pre-Delivery Payments (PDPs) are stage payments which are payable by the purchaser (eg an airline) to the aircraft manufacturer (eg Boeing or Airbus) under an aircraft purchase agreement, over a period of months or years before delivery of the aircraft. PDPs can account for a substantial portion (eg 30%) of the total aircraft purchase price. Many tens of millions of dollars may therefore be payable at intervals such as 24 months, 18 months and 12 months before the delivery date of each aircraft.

PDPs provide working capital to the aircraft manufacturers during the manufacturing process, and also protect the manufacturers from the risks of a default by the purchaser. However, significant cash payments are required to be made by the purchaser before each aircraft is delivered